Barclays still has $600m of costs to cut, but maybe it needs to buy some M&A bankers
Barclays’ released its second quarter results today. They don’t look bad. Profits rose 27% on last year and the business is now generating a passable 9.6% return on equity, which is better than the 7.7% it generated in Q2 last year or the 5.6% it mustered in Q2 2022.
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As the chart below shows, though, not all areas of Barclays’ investment bank are thriving equally. Fixed income sales and trading revenues fell 3% year-on-year in Q2, compared to an increase of 16% and 17% respectively at Morgan Stanley and Goldman Sachs. This was partly the result of a one-off £100m gain from the inflation linked financing business in 2023, but was also because Barclays’ fixed income sales and trading business is skewed towards macro trading, which has been weak this year. CEO Sundararajan Venkatakrishnan wants to build up the stronger performing securitization business, but it hasn’t happened yet.
Venkat may also want to hire some new M&A bankers. M&A revenues at Barclays were up 6% year-on-year in the second quarter, which wasn’t bad in the context of Goldman Sachs (7%) or Bank of America (-3%) but looks insipid alongside the 184% increase at Deutsche Bank.
What’s the difference between Barclays and Deutsche Bank? While Barclays has been losing swathes of senior M&A bankers, Deutsche Bank has been hiring them. DB said in June that it hadadded 75 managing directors and directors in the past 18 months and 125 bankers in total. Barclays has also been hiring to replace the bankers it lost to UBS and elsewhere in 2023, but not all its new hires are sticking. – Douglas Melsheimer, a tech investment banking MD who only joined from Goldman last year, recently left for JPMorgan.
Given that Deutsche
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